Gas-powered Car or Hybrid? 3 Things to Keep in Mind Before Signing an Auto Loan
If it's time to take out an auto loan and purchase your next vehicle, one decision to explore is whether you prefer a gas-powered car or a hybrid automobile. Hybrid vehicles usually cost more than comparable models, resulting in a larger auto loan, but you'll have the advantage of spending less on fuel. Whether or not the higher price tag (and bigger auto loan) makes sense depends on the specifics of your personal situation. Here are a few things to keep in mind as you make your decision.
Your Annual Mileage
One of the top advantages of a hybrid vehicle is that if you drive a lot, you'll realize a lot of fuel savings over the car's lifespan. For example, assume you drive 20,000 miles each year. If you opt for a 2020 Honda Accord Hybrid Base instead of a 2020 Hybrid Accord LX, the fuel savings provided by the hybrid version will cover the higher price difference in four years (assuming a fuel price of $2.14 a gallon). Alternatively, if you have a short commute, you might be better off sticking with a fuel-efficient, gas-powered car. Looking at the previous example with the 2020 Honda Accords, if you only commute 7,500 miles each year, you won't realize enough fuel savings to make up for the hybrid's higher auto loan for a whopping 10.5 years.
How Well the Vehicle Holds Its Value
Unless you're absolutely certain you're going to buy and own a car until the wheels fall off, it's smart to pay some attention to the vehicle's resale value. In the past, hybrid vehicles didn't hold their values quite as well as their gas-powered counterparts due to continued advancements in hybrid technology. However, now that technology for hybrid cars has stabilized somewhat, hybrid automobiles are doing a better job than traditional vehicles at holding their values. This means you're less likely to find yourself upside down in your auto loan (owing more than your vehicle is worth).
The Repair & Maintenance Costs for the Vehicle
Many individuals focus on the price of the car when taking out an auto loan, but another component to keep in mind is the repair and maintenance costs for the vehicle. Some tasks, like changing filters and oil changes, are the same price for hybrid and gas-powered vehicles.
However, the cost of a hybrid car battery is significantly more than that for a gas-powered car. Hybrid car batteries cost around $2,000, while gas-powered car batteries cost approximately $200.
It's worth noting you only need to change a hybrid car battery every 180,000 miles or so. Depending on how long you plan to own the car, this may be a non-issue. Conventional car batteries require changing every 30,000-50,000 miles.
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